Insurance of trade receivables
Insurance of trade receivables (credit insurance) is a form of protection against your buyers´insolvency or payment default.
The main reason for taking out any kind of insurance is its ability to eliminate risk or at least reduce it to a tolerable level. The insured trades the risk of large-scale credit loss for the certainty of indemnification. The price for this trade is payment of insurance premium that are just a fraction of the potential losses.
Accounts receivable constitute a significant portion of the assets on a company´s balance sheet. Assets like machinery, buildings, inventories etc. are usually insured against damages, e.g. against fire. Accordingly. the category of assets composed of receivables, which can account for up to 30% of a company´s total assets, should also be insured.
Credit insurance is thus an effective tool to help you manage your assets and liabilities.
Insurance of trade receivables (credit insurance) comprises a set of services.
The risk of your buyers becoming insolvent or defaulting can represent a substantial source of credit risk that you assume. Credit risk and market risk are significant factors putting your business at risk.
Administration involved in insurance
The administrative workload involved in credit insurance is minimal.The insured has to perform the following basic operations:
• Request for credit limits, containing: the buyer´s identification details and the amount of the requested credit limit, or possibly the requested increase of an existing limit.
We provide a sophisticated instrument to simplify this basic operation: EOLIS, is a programme that enables online buyer searches in the Euler Hermes group´s database and the submission of request for credit limits or credit limit increases form any computer with an internet connection.
• Insured monitors the level of receivables, the use of individual credit limits and the payment of insured receivables, if the debtor is in arreares it informs the insurance company.
• Insured transfers to the insurance company documents related to unpaid insured receivables.
• When the insurance period has ended, it generates a declaration of realised turnover for this period. Based on this declaration the insurance company charges the final insurance premium.
Česky
Euler Hermes Group
